Hi Sean,
Thanks for your interest in our simulations
The underwater simulations you've seen in this video are only visual simulation (no physics). It was used to validate the AI of the underwater robot and to test the vision algorithm for an underwater student competition (Student Autonomous Underwater Competition - Europe). This simulation was used in 2008 and 2009 by the teams of the University of Nice and the university of Cambridge.
We are now developing a new simulation engine that will still be fully compatible with MSRDS but with a much improved visual rendering and physics simulation. We've already done some
aerial simulation with realistic physics using this engine, and the same technology can be applied to create underwater simulations. This new engine is now in a mature prototype state and should be available in early 2010.
if you're more specifically interested by a project (underwater or not) don't hesitate to contact me directly: copigneaux at simplysim .net
Bertrand.